What Does Joint Tenancy Mean?

Joint tenancy describes a way that two or more people can own any asset (real estate, financial investment, a car, artwork, etc.). Many people take title to property as joint tenants because it’s fast and easy and doesn’t require the services of a lawyer to set up.

If you own something in joint tenancy that means you and the other owners are joint tenants. If you go this route it is crucial to understand the nuances so you don’t get sidelined by any nasty surprises. The truth is that this form of ownership is a little tricky.

Note – I am not an attorney and can’t provide legal advice.  Please consult a qualified attorney regarding this and other legal matters.  Recently, I’ve received many questions on using a joint tenant beneficiary.  It’s an interesting topic and possible very useful to use.

What Is So Special About Joint Tenancy?

If you are part of a joint tenant arrangement it means that you and the other joint tenants own an asset together. The thing that disguises joint tenants from other types of co-ownership agreements is that all joint tenants own an indivisible interest in the whole enchilada. That means many things:

1. If one of the joint tenants dies, the surviving joint tenants become the new owners. That means the deceased joint tenants can’t name a beneficiary or put the property in his or her trust or will. Even if they do, it won’t matter. The surviving joint tenants pick up all the pieces after any one of the others pass away regardless of what is written in the trust or will. This is known as the Right of Survivorship.

2. Selling joint tenant property is thorny. Depending on how the agreement was created all of the JTs may have to agree to sell in order for that to happen. If that’s the case and you want to cash in, you’ll have to get the other joint tenants to agree in order to sell. If you can’t get on the same page with each other you’ll find yourself in a very uncomfortable situation – and quite possibly in court.

On the other hand, sometimes the joint tenant agreement allows any one of the tenants to sell the asset without even informing the other joint tenants. If that’s the case you really have to keep your eyes and ears open at all times. The last thing you want is to wake up and find that the rug has been pulled out from under you – and then sold.

3. All the joint tenants own the asset equally and it doesn’t matter how much any of the joint tenants contribute to the deal. Keep that in mind if you are putting up more money than the other people my friend.

Liability

You can see that holding property as joint tenants can be complicated. But it can also be dangerous. That’s because if any one of the joint tenants is sued the creditor might claim the entire asset.

Let me describe a particularly ugly hypothetical scenario. Jane is an 85 year-old widow and has $50,000 to her name which she has on deposit in the bank. She names her daughter Ellen as joint tenant on her account for convenience.

The money was Jane’s but as soon as she makes Ellen her joint tenant, the money belongs to both of them equally and indivisibly. If Ellen gets divorced or is sued, her ex-husband or creditor can go after that entire $50,000 leaving Jane broke. That’s going to hurt.

You can see how terrible this can be. And unfortunately things like this happen all the time with joint tenants.

Owning property in joint tenancy has its benefits. It’s inexpensive and easy to set up. For the right people under the right circumstances, it can be a perfect solution. But it doesn’t work for everyone.

Do you own property in joint tenancy? Are you sure it’s the right way to go?